NBS Monthly Bulletin, February 2013 – Summary

The euro area fell more deeply into recession in the last quarter of 2012. According to the flash estimate, euro area GDP for the period contracted by 0.6%, thus confirming the negative tendencies indicated by monthly figures. The euro area recession has already begun to weigh on the Slovak economy, which according to the SO SR's flash estimate recorded markedly slower growth in the fourth quarter. The latest official figures indicate that the performance of Slovakia's economy in 2012 was worse than projected in the Revision of December's Medium-Term Forecast (MTF-2012Q4R).

Industrial production, stripped of the car industry's contribution, remained flat over the last quarter of 2012 and showed modest signs of growth in December. Sales, too, stagnated. According to forward-looking indicators, these adverse developments stemmed from declining demand. The situation in industrial production was also reflected in export performance, which declined in December. With domestic demand muted, imports fell even more sharply than exports.

The headwinds facing the real economy have also been affecting the labour market situation. Employment continued to fall in December and for the fourth quarter as a whole it declined quarter-on-quarter by 0.4%. Wages increased more sharply in December than in previous months; however, the sharp month-on-month increase in wages was probably caused by the payment of bonuses as a way of ensuring that employees and employers avoided higher taxes and levies that came into force in January 2013.

Inflation decelerated in January in line with expectations. Cost-push inflationary pressures abated with the stabilisation of commodity prices. Services price inflation remained low, reflecting the continued sluggishness of consumer demand. The overall slowdown in headline inflation was attributable to the increase in regulated prices being lower than in January 2012.

The adverse economic growth figures for the euro area and Slovakia do not necessarily heighten the risk to the next forecast, given that nascent signs of an upturn began to appear in the euro area in the first months of 2013. Euro area industrial production increased month-on-month in December and "soft" indicators have picked up this year. The downturn of the euro area economy is assumed to have bottomed out in the fourth quarter of 2012.

Note: The full text of the Slovak version of the NBS Monthly Bulletin for February 2013 will be published on the NBS website on 25 February 2013 at 10.00 a.m.